A Tale of Two Epiphanies

by Karen C. Reyes

Financial planners are only for those who have oodles of money. Wrong! But that’s what I always believed when I was young and working, and when retirement was a far, far off event that I couldn’t even comprehend. My husband and I were both working to raise a family and extra money for investment was non-existent.

We had a single friend who had made quite a bit of money in the stock market. One year my husband got a bonus of $2000 and our friend urged us to invest it in this new company called Alaska Airlines. We would check the paper every day to see how it was doing. Our veteran investor friend told us that it would take years to make a return on this stock. We couldn’t wait. Six months later we cashed out the stock to pay for a new roof on our house. That was my first experience with investing and financial advice (not advisor, mind you, advice from a self-proclaimed expert).

Years went by. I never questioned the need for a financial advisor until around 1990 when I divorced my husband. Now that I was alone and in my early 40s I started actually thinking about retirement. Coincidentally, my company started offering a 401(k) with a 3% match. And they offered free financial planning from the company that was administering the company retirement funds. Of course, they were affiliated with that company so they urged us to invest as much money as we could into the 401(k). I could only manage the minimum to get the match. That money was shoveled (or I should say spooned since my contribution was so small) into the fund suggested by their financial planner. (I learned later that he was far from being “independent”).

It was about that time that I was assigned to write some articles about financial planning for the magazine I worked for. I interviewed a host of financial experts. The resounding message from the experts was use an independent financial planner — the earlier the better. That is when it started to dawn on me that I, now in my early 50s, should get serious. But I felt pretty secure about my retirement income because my company had both the 401(k) and a defined benefit plan (pension).

And then the 2008 crash came.

I talked to one of my writers who is a financial expert and he told me not to panic. I had a host of questions:

What happens if I lose all my 401(k) funds?

How could I stem the loss?

Was there a better fund for me to move what was left of my quickly dwindling 401(k)?

Could I transfer my money to another investment company that might be safer than the one I was in (I found out later that the answer to that question was no)?

I asked my friends what they were doing. Most of them were just biting the bullet and searching for answers like me.

Then came the buyout offer. That’s when I knew I had to consult someone. More questions:

Would I have enough to live on if I took the offer?

How could I maximize my income?

Where would be the best place to invest my lump sum?

Would my pension and Social Security keep up with inflation during the coming years?

Should I sell or rent a vacation home my ex-husband and I had bought many years before?

I took all these questions to my first independent financial planner, through National Association of Personal Financial Advisers (NAPFA). Previous to my contacting her I didn’t think I had enough money for a planner. Indeed I called one firm a few years before referred by my friend. They said they would not work with people who didn’t have at least $100K portfolio.

The NAPFA planner was really thorough. She took a complete inventory of my assets and debts. She understood my fears. She didn’t tell me what to do, she gave me options based on what my future plans and goals were. She helped me make a budget which showed that even though my annual income would be almost halved after retirement that the money I would realize from the sale of my Virginia home, my pension, my widow’s Social Security, my buyout lump sum, my 401(k), my lifetime healthcare coverage, plus rental income, that I would be fine. And I have been for the last six years.

When I relocated from Washington, D.C. to Texas a year later I found another independent financial planner. I was ready for a tune-up of my current financial plans. I had lots of questions for him:

Where should I roll over my 401(k) to? It was still sitting in my company’s designated investment company.

What would be the best way to finance the remodel of the vacation home I had owned for the last 30 years?

What would the tax implications be when I started using my California condo as a vacation home for myself instead of a rental?

What would the California tax implications be since I lived in Texas?

He helped me with all my questions. I still call him when I have a question.

I recently received a notice that I will be required to start taking my Required Minimum Distribution from the IRA where I rolled over my 401(k) five years ago. I called my financial planner to discuss best options.

Should I roll them over into another fund?

Invest them elsewhere?

Spend them for a great vacation?

Keep them easily accessible in case I need them for an emergency or living expenses?

He walked me through all my options in less than an hour. His hourly rate isn’t cheap, but it’s worth every penny.

The monies that I have now need to last me for the rest of my life. My Social Security and pension pay the bills but for the extras like traveling, buying a new car every 6 or 7 years, treating my grandchildren, and living a moderately comfortable life I’m depending on the investments that I’ve managed to accrue over a lifetime. Consulting an expert on how to do this is key to achieving this goal. My only regret is that I didn’t start talking to an independent financial planner earlier in my life.

Steve’s note on the next blog post:Karen’s sister, Therese, wrote her financial coming-of-age story. FYI, if you have a financial story please feel free to email it to me, and I will publish it. My favorite stories are from those who started out knowing little to nothing about managing your finances to now managing them with or without a fee-only financial adviser.

About

Steve Schullo is a retired Los Angeles Unified School District elementary teacher turned 403(b) reform advocate and author of two books. Steve is NOT a licensed finan­cial or invest­ment advi­sor, and the infor­ma­tion and expe­riences shared as a do-it-yourself investor con­tained herein is for infor­ma­tional pur­poses only and does not con­sti­tute finan­cial advice.

Through­out my blog, I share my expe­ri­ences with finances as an ordi­nary con­sumer, not as a pro­fes­sion­al. Do not start, change or mod­ify your port­fo­lio based on the infor­ma­tion in this blog alone. Any ideas, invest­ment strate­gies, links to fee-only pro­fes­sional advis­ers and par­tic­u­lar invest­ment com­pa­nies dis­cussed in any arti­cle or in my blog are a reflec­tion of my expe­ri­ences and should not be con­strued as a rec­om­men­da­tion. Always con­sult with a tax or finan­cial professional.